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Credit Unions

Volume 756: debated on Thursday 16 October 2014


Asked by

To ask Her Majesty’s Government what plans they have to support credit unions in addition to the Credit Union Expansion Project.

My Lords, the recent HM Treasury call for evidence sought views on how government and others could do more to support the development of the credit union movement. The call for evidence closed on 1 September. Responses are currently being considered by the Treasury and an announcement will be made in due course. We are also working with others, including the Church of England, the Ministry of Defence and banks, to facilitate increased access to credit unions.

My Lords, I declare an interest as a director of London Mutual Credit Union. I am delighted to see the noble Lord, Lord Newby, here. I hope it is okay with the noble Lord, Lord Freud. Will the noble Lord join me in congratulating Her Royal Highness the Duchess of Cornwall on her work in support of the credit union sector? She is today hosting a reception at Clarence House to support International Credit Union Day. Will the noble Lord arrange for me to meet the relevant Minister in government to discuss how to get government departments to follow the example of Clarence House and this House and arrange for civil servants to be able to join a credit union using payroll deduction?

My Lords, I would be happy to do that. The Government are keen that civil servants should join credit unions where possible. Some work has been undertaken on how we could do that at reasonable cost. In the mean time, civil servants are being encouraged both to join credit unions and to get involved as volunteers. For example, an accountant at DWP is the treasurer of a credit union in Sheffield. That is a good example of how civil servants can use their experience and benefit the credit union movement.

My Lords, I declare an interest as the independent non-executive chair of the Lending Standards Boards and as having agreed to take a similar role with Cornerstone and this particular project. I join the noble Lord in welcoming the recognition of today’s International Credit Union Day. I congratulate my noble friends in the coalition Government on the project itself. Will the noble Lord join me in urging all credit unions, all parties and everyone in the financial services sector to make this project a success and to raise awareness of the great work done by credit unions, not only in the UK but throughout the world?

My Lords, I absolutely agree with my noble friend. I am myself hosting a reception in the Treasury this afternoon to mark International Credit Union Day. At that event I will be having discussions with, and we will be hearing from, Paulino Rodrigues, the chief operating officer of Sicredi, a very successful Brazilian credit union movement from which we are attempting to learn some lessons on common branding and operating standards to give a real boost to the sector.

My Lords, I join in the expressions of good will that have come from all other Members. So that the House may judge how far we lag behind other countries, will the Minister confirm that, in the United Kingdom, the level of personal credit derived from credit unions is less than 2%? Can he give some indication of how that compares with countries such as Australia, Canada and, of course, the Republic of Ireland?

The noble Lord is right that the number of members of credit unions and the amount of money involved is a lot less here than it is in some other countries. There are now about 1.1 million members of credit unions. Although by the standards of some other parts of the world that is not very high, it does represent something like an eightfold increase over the past 20 years, so credit unions have been growing. The challenge for everybody now, having got to a firm base, is how to get a step-change up in professionalism and the ability of credit unions to manage larger volumes, and a better marketing campaign to ensure that people understand why credit unions might in many cases be better for them than the traditional banks.

My Lords, I bring attention to my membership of the Credit Union Foundation and the Lloyds Banking Group grants committee for credit unions. One of the lessons of the past has been that grant funding has made the sector weaker rather than stronger. Capital ratios are the key. Given that mutuals are unable to raise capital, any proposals by the Government should ensure that the capital allocation of credit unions is improved. Will the Minister keep this point in mind so that we have a credit union sector which is growing, is more stable and can serve the best interests of the poor members of this country?

I begin by recognising the valuable work that the noble Lord does with Lloyds in this respect. The part that the big commercial banks can play, not so much in funding—although that is useful—but also in transferring expertise, is very important. One of the key things now for credit unions in increasing the amount of capital they have at their disposal is to encourage large numbers of people with some relatively small amounts of capital to become members of a local credit union and deposit some capital with it. The work of the Church of England, for example, is potentially very important. There are many members of the church who would be able to join a credit union and put in a relatively small amount of money which could collectively transform the capital position of the many credit unions with a very small capital base.

My Lords, the investment made by the Government in the credit union movement has paid dividends. We note with pleasure that 7% of the Scottish adult population is now registered with a credit union. However, for them to rationalise, streamline, offer new products and help people avoid payday lenders, credit unions need to have good back-office bank functions and new products. What progress has been made with the banking sector and the Post Office to provide those appropriate back-office functions which will allow them to become more streamlined and help people to keep out of the hands of payday lenders?

We all agree that we want to make it easier for people to keep out of the hands of payday lenders. The credit union expansion programme, to which the Government have committed some £38 million, is attempting to do exactly what the noble Lord describes. For example, it has established an extremely inelegantly named but very important thing called an automated decision-making tool, which makes it easier for credit unions to determine whether an applicant is eligible to become a member of the credit union. That kind of back-office support will make it much easier for credit unions to expand.